Tandy Emphasizes Retail, Finding Manufacturing Too Competitive
New chain of electronics and appliance stores tries to create a multisensory shopping experience to beat competitors. INTERVIEW
ARLINGTON, TEXAS — NEVER mind the 181 different models of refrigerator or the 315 kinds of television. "The main thing we try to sell is fun," says Bill Nieman, manager of Incredible Universe, Tandy Corporation's new chain of electronics and appliance stores.
A giant video screen controlled from a multimedia DJ booth hangs above the stage, where Toshiba will demonstrate new products one day, customers will get two-step lessons the next, and a local high school band will perform the next.
Kids are encouraged to try out video games before they buy. (Hardcore game addicts will be switched off remotely.) Sound booths and theater rooms demonstrate the latest in home entertainment systems. A daycare center diverts toddlers, and a pizza restaurant refreshes shoppers.
All the goings-on are referred to as "the show." Sales clerks are "cast members" who wear "costumes," not uniforms.
Those manning the karaoki booth even sing and engage customers - "guests" - in karaoki contests.
"Shopping should be fun," Tandy Chairman John Roach says. "People will tire of going to warehouse clubs and places that just stack stuff up. Shopping malls historically have provided a positive social atmosphere. Some of that has dissipated with the shift toward big-box retailers."
"We have to have something compelling," he adds. "You've got to drive past three or four competitors to get to our store."
THE results have been encouraging thus far. Nieman notes that the Arlington store sold more Philips interactive compact disk units during Christmas than any single chain of stores.
The Arlington store, which opened in October, and a second store in Oregon need $40 million in sales to break even but are on track for $60 million. Other high-volume, well-known consumer electronic stores might do $15 million, Roach says.
That is welcome news for Ft. Worth-based Tandy, which is renewing its focus on retailing. Last week it shed its computer manufacturing operations, selling them to AST Research Inc. of Irvine, Calif. That will remove it from an industry price war, plus satisfy concerns from suppliers who also regarded Tandy as a competitor, Roach says.
What is more, Tandy's stock has followed the trend set by makers of personal computers - and that trend has been to "way underperform" the Standard & Poor 500 over the past five years, Roach says. Redeploying the company's assets should restore growth.
Roach says Tandy will also sell Sullivan, a maker of ready-to-assemble furniture; Memtek, which makes Memorex audio and video tape; and Lika, which produces printed circuit boards.
Only 20 percent of Tandy's manufacturing will remain, and that will be dedicated to providing products for Radio Shack, Tandy's chain of consumer electronics convenience stores.
Besides Radio Shack and Incredible Universe, Tandy operates Computer City, McDuff Electronics, VideoConcepts, and The Edge in Electronics. New retailing formats include Radio Shack Express, Computer City Express, Famous Brand Electronics, and Energy Express Plus.
"Nobody's going to do all the business," Roach says. The various formats aim at different niches, he says.
Computer City, which opened in 1991, will likely exceed $1 billion in sales in 1994, giving it one of the most rapid growth rates in retailing history. Radio Shack does $3 billion in sales, but Computer City could eventually be bigger and Incredible Universe bigger still, Roach says. Incredible Universe executives are planning to open two more stores this year, five next year, and seven in 1995.
BESIDES entertainment, Incredible Universe emphasizes selection and price. "We do the shopping for you," Mr. Nieman says.
The store carries the entire lines of its suppliers. Managers read the newspapers every day in order to reset their prices below those of their competitors. The staff also goes window-shopping daily to discover and beat unadvertised in-store promotions at other stores.
Mr. Roach says that the store does not guarantee the lowest price because doing so might have the opposite effect and "in some way imply" that Incredible Universe's prices are not the lowest.
Nieman adds that Incredible Universe is committed to "100 percent guest satisfaction." He will lower his price to beat a competitors', not only on identical merchandise but even when his is a different brand with more features.
There's no need to lug around purchases. Customers merely show a bar code they receive on their first visit. The staff enter orders on electronic note pads, which radio the order to the warehouse. There the merchandise is promptly readied for customer pickup.
Nieman notes that two years of customer focus groups went into developing the concept for Incredible Universe. "This is the first time Tandy took the blinders off and did exactly what the customers said to do," he says.